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Northwest Developments Limited v Zhang

Northwest Developments Limited v Zhang

Case [2020] NZHC 1151 28 May 2020

Contract Formation

Breach of Contract

Unconscionable Conduct

Civil Litigation & Procedure

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-936

[2020] NZHC 1151

BETWEEN NORTHWEST DEVELOPMENTS LIMITED
Plaintiff

AND

CHENG ZHANG, JIN KUK JUNG and PILL SOON SO

Defendants

AND

SANLI HOMES LIMITED and SANLI GROUP LIMITED

Third Parties

Continued …

Hearing:
17, 18, 19, 20, 21, 24, 25 and 26 February 2020 (further

submissions on 4 March 2020)

Appearances:

M J Fisher and J J Yoon for the Plaintiff in CIV-2017-404-936 J Burley and S Pala for the Defendants in both proceedings

K J Crossland and J K Boparoy for the Third Parties in CIV-2017- 404-936 and the Plaintiffs in CIV-2017-404-980 (excused from 21 February 2020)

Judgment:

28 May 2020

JUDGMENT OF GAULT J

This judgment was delivered by me on 28 May 2020 at 3:30 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar

……………………………………

NORTHWEST DEVELOPMENTS LTD v ZHANG, JUNG and SO [2020] NZHC 1151 [28 May 2020]

Continued …

CIV-2017-404-980

BETWEEN

SANLI HOMES LIMITED and SANLI GROUP LIMITED

Plaintiffs

AND

CHENG ZHANG, JIN KUK JUNG and PILL SOON SO

Defendants

[1] These two proceedings concern a three-way dispute in a subdivision development known as the Huapai Triangle, an area comprising approximately 65 hectares of land on the south side of State Highway 16 near Huapai in west Auckland.

[2] In broad terms, the two sets of issues raised in the proceedings relate to liability for infrastructure costs and consequential loss incurred by Northwest Developments Ltd (Northwest),1 and responsibility for the failure to settle an agreement for sale and purchase between the defendants and Sanli Homes Ltd or Sanli Group Ltd (together Sanli).2

[3] Some disputed issues have already been determined in other proceedings,3 and the outstanding issues have further narrowed during the trial.4 The remaining issues between Northwest and the defendants concern liability for contractual interest on the infrastructure costs, and claims for consequential loss and solicitor client costs. It is still necessary to set out the background circumstances in some detail.

Parties

[4] Northwest is a land development company. It is the owner of the property at 81 Nobilo Road, approximately 6.3 hectares in the south-eastern corner of the Huapai Triangle. Northwest’s claim against the defendants is brought under an agreement known as the Five Owners’ Agreement dated 23 June 2015.5 Northwest became an assignee of that agreement following its purchase of 81 Nobilo Road.

[5] The defendants, Mr Zhang, Mr Jung and Ms So, are the owners of the property at 77 Nobilo Road, approximately 7 hectares in the north-eastern corner of the Huapai Triangle.6 Mr Jung and Ms So are married and own a half share in the property. Mr Zhang, a business partner of Mr Jung’s, owns the other half share. Mr Jung speaks Korean and gave evidence with an interpreter. Mr Zhang speaks Cantonese and gave evidence with an interpreter. Ms So did not give evidence.

1 The plaintiff in CIV-2017-404-936.
2 Third parties in CIV-2017-404-936 and plaintiffs…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Northwest Developments Limited v Zhang

Details

AGLC: Northwest Developments Limited v Zhang [2020] NZHC 1151
Case: [2020] NZHC 1151
Decision Date: 28 May 2020

CaseChat Overview and Summary

In Northwest Developments Limited v Zhang, the High Court of New Zealand addressed a complex dispute involving multiple parties and substantial infrastructure costs associated with a land development project. Northwest Developments Limited (Northwest) claimed reimbursement of unpaid infrastructure costs, consequential losses, and solicitor-client costs from the defendants, Cheng Zhang, Jin Kuk Jung, and Pill Soon So, who were the owners of adjacent land parcels. The defendants counterclaimed, which was later discontinued. The case hinged on the enforceability of the Five Owners' Agreement, which governed infrastructure cost-sharing among the landowners in the Huapai Triangle development.

The court found that the defendants were liable for their share of infrastructure costs under the Five Owners' Agreement, which they had admitted. Northwest claimed interest at a contractual default rate of 20% per annum on the unpaid infrastructure costs. The defendants argued that this interest rate was unreasonable and potentially an unenforceable penalty. The court rejected this argument, finding that the interest rate was a legitimate commercial term necessary to incentivize prompt payment and reflected the higher borrowing costs typical in property development projects. The court also held that the interest continued to accrue despite the defendants' genuine belief that they were not liable.

Northwest also sought damages for consequential losses arising from the delay in obtaining new titles and settling sales due to the defendants' refusal to consent to the survey plan. The court found that the defendants' refusal to consent was an effective cause of the delay and that the consequential losses claimed were foreseeable and recoverable under the first limb of Hadley v Baxendale. However, certain costs related to a third party's actions were deemed not recoverable.

Lastly, Northwest claimed statutory interest on the damages under the Interest on Money Claims Act 2016. The court allowed this claim, distinguishing it from the contractual interest already awarded.

In summary, the court granted Northwest judgment against the defendants for the infrastructure costs, contractual interest, consequential losses, and statutory interest on damages, along with costs associated with the proceedings.

Orders